Early in our marriage, my husband and I had an opportunity to attended a weekly seminar called Financial Peace University. Throughout the nine weeks we attended, we had some basic financial principals reinforced and learned other wise tips about handling our funds well. As a new couple, it was really helpful to make sure we were on the same page when it came to money. One of the – if not the – most important concepts we learned about was that of the emergency fund.
We quickly learned the value of having a fully stocked emergency fund when we had to replace our roof (with just one month’s notice!) and cover an insurance deductible within a two month window. Life was stressful enough without worrying about finances or taking on debt! The emergency fund provided peace of mind and financial stability in one.
What is an emergency fund?
Initially, an emergency fund is a $1,000 fund that you keep separate from other savings and funds (down the road, your goal is to have at least three months worth of expenses in the bank). You need to keep these funds easily accessible. There’s a place for investing money – this chunk of change is not intended for that.
What is an emergency fund for?
It should be obvious… it’s for emergencies, but we all need a down-to-earth reminder that emergencies are things like the car breaking down, the refrigerator going out, and unexpected medical costs. Things like birthdays, Christmas, and children needing new clothes are not unexpected. Plan ahead and use a coupon or even thrift shop for those, if it’s a stretch. The emergency fund should only be used for true emergencies.
How do I build an emergency fund?
When we first determined to build an emergency fund, there was no extra money in the budget. None. For us it meant diligently putting my husband’s quarterly bonuses in savings until our desired amount was reached. Prioritize important financial goals! Don’t underestimate the power of a garage sale or selling off a few things here and there that you don’t need or use any more in building up your emergency fund.
Dave Ramsey, the creator of Financial Peace University, has a handbook for Financial Peace University called Dave Ramsey’s Complete Guide to Money. I really encourage you to get a copy and read it. You can also check out one of our past posts on more of the principles found in Financial Peace University.
Have you experienced a time when having an emergency fund has been a financial life-saver? Comment below & tell us about it!
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